Regulators go after dynamic pricing
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The UK Competition and Markets Authority and the EU Commission have recently confirmed that they are working on multiple (not yet public) dynamic pricing antitrust investigations. This means that we are likely to see numerous antitrust investigations launched before the end of this year, both in the UK and EU with civil actions for damages running alongside those investigations.
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Subscribe nowWhat is dynamic pricing?
Dynamic pricing is a system that sets prices or recommends prices to be set automatically, usually based on current and past data about market conditions (it is also known as 'algorithmic pricing').
Which sectors use dynamic pricing?
Dynamic pricing is widely used across various sectors including airlines, hotels, transportation, retail, entertainment (concert tickets) and e-commerce.
Why are antitrust enforcers interested?
The main competition concern is that pricing algorithms can be used to implement or monitor price-fixing. The UK CMA previously found that two online sellers of posters and frames had participated in an illegal price-fixing cartel by agreeing that they would not undercut each other’s prices. They used automated re-pricing software to give effect to the cartel. Even without an explicit agreement to fix prices, algorithms can result in the illegal exchange of commercially sensitive information. It is no defence to argue that you do not: understand how the algorithm works; or know exactly what it is doing.
What do I need to do?
If you work in a business or sector that uses dynamic pricing, you should do a quick 'health check' to identify any red flags/high risk issues. This would include checking whether: your algorithm is used by others in your sector; price resetting is influenced by confidential price information of competitors; the algorithm results in exchange or access to competitor information. If the answer to any of these questions is yes, you should contact us to discuss whether a more detailed antitrust risk assessment is recommended.
